The Breakup Spreads

It's not unlike the sound of ice cracking on a pond during an early spring thaw. But the sound you're hearing now is that of media companies being broken up as their managements try to separate their atrophying newspaper operations from other units with more promise.

On Tuesday, E.W. Scripps (NYSE: SSP  ) became the second publisher-broadcaster in the past two weeks to announce that it would wield a meat ax to separate poorly performing assets from more robust ones. The company will join Belo (NYSE: BLC  ) in splitting into two public parts, with its successful cable TV networks and its shopping websites cleaved from its atrophying newspapers and slow-growth television stations.

In Scripps case, the separation -- which likely will occur in next year's second quarter -- will be structured as a tax-free dividend of stock in a new company, Scripps Networks Interactive. Included in that company will be TV networks HGTV, The Food Network, Fine Living, DIY Network, and Great American Country, as well as websites Shopzilla.com and Uswitch.com.

The newspaper group includes Denver's Rocky Mountain News and the Memphis Commercial Appeal, while the television group consists of 10 ABC-affiliated stations. At Scripps, the interactive media properties generate in excess of 25% more revenue than the traditional media entities, but they do so with fewer than a third as many employees. And perhaps just as important, Scripps Networks Interactive will be comprised of properties that are growing, albeit not as rapidly as in past years, while the traditional media properties are heading in the other direction.

This is just the first step. Maybe down the road, E.W. Scripps will be hauled back into surgery to separate its newspapers from the television properties. Admittedly, broadcasting isn't dancing a jig today, but unlike newspapers, it's likely to experience a healing.  

As I mentioned after the Belo split, I believe more companies will follow suit and separate their newspaper properties from their electronic media operations in hopes of driving greater shareholder value. At the time, I listed E.W. Scripps in addition to Tribune (NYSE: TRB  ) -- either before or after its purchase by Sam Zell and his team -- Media General (NYSE: MEG  ) , and Gannett (NYSE: GCI  ) since all these properties have broadcasting and publishing business units. Now that Scripps has also taken the jump, I wouldn't be surprised if others are preparing to do the same.

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